The environmental and social impacts of palm oil, an ingredient in our Company’s supply chain, make it highly controversial. Accordingly, we believe the Company’s failure to procure certified sustainable palm oil is a brand risk, to both our Company’s reputation and long-term to the security of supply.

Approximately 85% of palm oil is grown in Indonesia and Malaysia, much of it on industrial plantations. According to the Union of Concerned Scientists, palm oil plantations are a large source of greenhouse gas emissions (GHGs) because they are often established on land converted from swamp forests (“The Root of the Problem: What’s Driving Deforestation Today”, June 2011).

Due to high levels of continuing deforestation and the burning of peatlands in land clearance, Indonesia is now the 3rd largest emitter of GHGs globally. Agricultural expansion, much of it for palm oil production, can be better managed by using other land types than standing forest.

Palm oil plantations that are not sustainably managed have also been shown to destroy habitats of endangered species, such as the orangutan. Consumers have demonstrated concern for orangutan welfare by campaigning against companies that have failed to source sustainable palm oil.

To address these and other social and environmental concerns associated with palm oil production and promote sustainable palm oil products, the Roundtable for Sustainable Palm Oil was formed in 2004.

Failure to manage the reputational risk of deforestation in supply chains has been disruptive for a number of high profile brands including Mattel and Nestle. Our Company has already come under pressure from Greenpeace.

A number of leading companies have committed to source only certified sustainable palm oil by 2015, including SC Johnson, General Mills, Mars, Nestle and Unilever. It is noteworthy that two of our company’s largest competitors, McDonald’s and Wal-Mart, have set specific and firm goals on sustainably sourcing palm oil. Our company has not made such a commitment and we believe has not addressed the risks described above.